Uncompleted housing construction adds up

Interest rates on loans to finance housing construction went up to 38.5% per annum.

Citizens can no longer afford loans for housing construction. The limit on concessional loans for the needy for 2013 might be reached in September. As most of the housing construction in Belarus is carried out using loans, fewer loans will result in uncompleted housing construction sites mushrooming all over the country.

In Belarus, concessional housing construction loans were issued on various grounds within various programmes for the needy. The lowest rates were offered to those who were judged to need better housing conditions and whose income per family member did not exceed a certain amount. One of such programmes, which offered loans at 12%-16% per annum, was suspended in August 2013. General conditions for housing construction loans imply interest rates, which were recently increased from 28.5% to 38.5% per annum, an unaffordable rate for most people. If a person’s monthly income is USD 1,000, he or she may be entitled to a USD 12,700 loan, less than one-fourth of the cost of a one-room apartment in Minsk. In addition, the person will have to pay back circa USD 450 per month for the loan. Such loans barely make sense.

In 2013 the state allocated BYR 10 trillion to cover costs of concessional housing construction loans. On September 1^st, the volume of long-term loans granted to individuals exceeded BYR 9 trillion. The state does not have enough funds to cover the needs in Q4 2013 and there are no additional resources in the budget. Therefore, if the state fails to find extra cash, all concessional housing construction loan programmes might be suspended until 2014.

There are virtually no resources in housing construction. Citizens do not have enough of ther own funds and the state might suspend concessional lending, which will result in failed obligations vis-à-vis developers. Developers also do not have enough funds to finish construction and only few have the opportunity to take out international loans. As a result, only those construction sites which have secured full funding until the end of the project will be commissioned in compliance with deadlines. Others will be added to the list of uncompleted construction sites.

Thus, all those wishing to participate in joint construction should carefully weigh the possible risks of delays in construction. The best option is to buy a commissioned apartment, but its price will be exceptionally high.